ICICI Bank shares spike 3% as Q2 numbers beat estimates, analysts lift target price

Shares of ICICI Bank, the country's second-largest private sector bank, popped up 3.1% to ₹1,294.55 apiece in early morning trade on Monday, October 28 following the bank’s September quarter results, which surpassed Street estimates and prompted analysts to raise their target prices.

Domestic brokerage firm Nuvama Institutional Equities stated that ICICI Bank’s Q2FY25 results stand apart from sector-wide pressures such as slower deposit growth and deteriorating asset quality. By maintaining a strong focus on granular, high-quality assets, ICICI has built a resilient balance sheet that has enabled the bank to consistently deliver strong results each quarter since FY21.

"ICICI has not only outperformed peers on earnings in Q2FY25, but it has also delivered strong results (4% QoQ growth in core PPOP) in a weak environment that most banks cannot deliver even in a strong macro. We expect the stock’s premium to peers to expand, more so to high-growth peers," said the brokerage.

Consequently, the brokerage retained its 'buy' rating on the stock, raising its target price to ₹1,470 per share from ₹1,450 earlier.

Similarly, Prabhudas Lilladher reiterated its 'buy' rating and increased its target price to ₹1,640 from ₹1,520, noting ICICI’s strong performance amidst stress in the broader unsecured lending segment.

ICICI’s provisions, at 43 bps in Q2FY25, are best-in-class compared to 50-78 bps for other private peers, suggesting that provisions over FY24-27E could remain lower at 40-50 bps (versus peers’ 50-65bps).

ICICI continues to protect core PPoP through effective cost controls, balancing the softer NIM environment. Its core RoA of 2.1% remains the highest in its class, said the brokerage.

Several other major brokerages have also revised their target prices for ICICI Bank, maintaining a 'Buy' recommendation following its strong quarterly performance. Jefferies raised its target price to ₹1,550 per share from ₹1,460, while Investec increased its target to ₹1,450 from ₹1,350.

Motilal Oswal also boosted its target price to ₹1,500 from ₹1,400, and Nomura adjusted its target to ₹1,575 from ₹1,420. Macquarie reaffirmed a 'Buy' with a new target of ₹1,350, up from ₹1,300. Meanwhile, IIFL upgraded its rating to 'Buy' and raised its target price to ₹1,480 per share from ₹1,370.

Q2 earnings: Another strong quarter

The bank on Saturday reported another strong set of numbers for the September quarter, with lower QoQ slippage, while peers faced growth slowdowns and rising credit costs. Its operating profit and PAT came in higher on the back of better fees and Opex.

ICICI Bank’s core net interest income rose by 9.5% YoY to ₹20,048 crore, driven by a 15.7% expansion in its domestic loan portfolio. The net interest margin came in lower at 4.27%, down from 4.53% a year earlier, as interest-earning asset (IEA) yields softened to 9.20%. Non-interest income grew 10.8% to ₹6,496 crore, primarily fueled by a 13.3% rise in fee income, which reached ₹5,894 crore.

The bank's core operating profit grew by 12.1% YoY to ₹16,043 crore in Q2 from ₹14,314 crore in Q2FY24.

Provisions (excluding tax provisions) stood at ₹1,233 crore in Q2 FY25, up from ₹583 crore in Q2 FY24 but slightly lower than ₹1,332 crore in Q1 FY25. The bank noted that provisions were lower in the prior year due to higher recoveries, adding that current provisioning represents only 0.4% of its total loan book.

Profit after tax climbed 14.5% YoY, reaching ₹11,746 crore compared to ₹10,261 crore in Q2 FY24. In terms of asset quality, the gross NPA ratio improved to 1.97% as of September 30, 2024, down from 2.15% at the end of the previous quarter, while the net NPA ratio slightly declined to 0.42% from 0.43%.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.